Airlines hope passenger surcharges will offset fuel price jump
The International Energy Agency warns that the prospect of large-scale disruptions to Russian oil production threatens a "global oil supply shock".
The price of Brent crude oil has jumped from its USD45-75 per barrel range of much of the past five or six years and is now comfortably above USD100. This threatens the recovery in airline profitability in 2022 (or, more accurately for most airlines, the narrowing of losses) as the industry seeks to pick itself up from the COVID-19 pandemic.
In response, a number of airlines are imposing, or considering, fuel surcharges on passenger fares.
Passenger fuel surcharges can only really work if they do not cause an erosion of underlying ticket prices. This needs a favourable supply/demand balance, economic strength and consumer confidence. Current price sensitivity in the low fares-led recovery suggests these conditions may not be fully in place.
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